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Strange behaviour of consumption during the transformation

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  • Kamil Janáček

Abstract

Both economic theory on consumption function and historical empirical evidence from advanced market economies prove that private consumption is less volatile during the cycle than GDP or fixed capital investment. The national accounts data for the Czech Republic in 1990-1998 show the opposite: the household consumption was more volatile than the GDP. This peculiarity of the Czech households behaviour has several reasons: significant increase in savings rate as a reaction to higher insecurity, rise of unemployment etc. the catch-up with living standards in neighbouring countries-members of EU. As a first step in this catch-up, households are accumulating wealth in form of savings; pilling-up some items of wealth; changing consumer behaviour as a reaction to price liberalization and relatively speedy changing price relations. It is highly probable that the volatility of private consumption will be higher than the volatility of GDP also in the next future.

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Bibliographic Info

Article provided by University of Economics, Prague in its journal Politická ekonomie.

Volume (Year): 1999 (1999)
Issue (Month): 5 ()
Pages:

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Handle: RePEc:prg:jnlpol:v:1999:y:1999:i:5:id:67

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Related research

Keywords: inflation; transformation of the Czech economy; consumption and GDP development 1990-1998; propensity to save; economic behaviour;

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